Friday, September 14, 2012

Chartology: Epic Break Down in US. Treasuries (TLT; TBT)

The  iShares Barclays 20+ Year Treas Bond ETF is down 1.93% while the double  inverse TBT is up 4.23%.

From Playing the Ponzi:
Well, we have lift-off.  Who knows how long it lasts, but it’s definitely at hand.  While stocks and commodities surge higher, I am even more intrigued by the breakdown in Treasuries.  I think it’s pretty funny that Bernanke jawbones about how “lower interest rates” are a goal of QE when – it seems pretty to clear to me – that they are not.  Higher stock prices is the goal.  The breakdown in TLT is pretty epic.

I expect that somewhere in the coming months we start to relive the 2007-2008 scenario, where broad indexes start to decline as higher commodity prices and higher interest rates squeeze consumers.  The higher commodity prices will likely lead to significant political unrest as well, perhaps upheaval.  Except this time, the Fed will already have it QE spigot on full blast.  TBT has lost a lot of folks a lot of money, but may finally be a decent play.

It’ll be interest to see how this plays out – i.e. epically unravels.
I wrote a longer article about the short-TLT play for Seeking Alpha, here.
See also:
Doug Kass and the WORST Trade of the Decade
It Looks Like Long-term Bonds Are Finally Rolling Over (will Doug Kass be saved from his worst trade ever?) TLT; TBT